Norway's central bank kept its key interest rate at zero at Thursday's monetary policy meeting, as expected, but said it could start raising rates much sooner than it previously projected.
Norges Bank said that despite higher Covid-19 infection rates and containment measures holding back the recovery, a large portion of adults in Norway will be vaccinated before the end of summer, while at the same time global economic developments are better than expected.
"In the Committee's current assessment of the outlook and balance of risks, the policy rate will most likely be raised in the latter half of 2021," Norges Bank said.
At its last meeting, the central bank said it would likely keep its key policy rate at zero for some time ahead with the rate path indicating a first hike in the first half of 2022.
In its monetary policy report Thursday, the bank said there are prospects for a pronounced recovery over the summer and economic activity will approach a normal level earlier than projected.
Norges Bank said, in making its projections, it had placed weight on the contribution of low interest rates to speeding up the return to more normal output and employment levels against the marked rise in house prices since spring 2020.
"A long period of low interest rates increases the risk of a build-up of financial imbalances," it said.
Write to Dominic Chopping at dominic.chopping@wsj.com
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Norges Bank: Rate hikes may come quicker in 2021 - MarketWatch
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